/ 28 September 2011

Africa trade bloc mulls regional infrastructure bond

The African regional trade bloc Common Market for Eastern and Southern Africa (Comesa) is considering issuing a regional infrastructure bond and is seeking advisers, a senior trade official said on Tuesday.

The trade blocs Comesa, the Southern African Development Community and the East African Community have embarked on aggressive infrastructure development to bolster their competitiveness, which investors say is hurt by problems such as poor roads and railways and unreliable power supplies.

“The advisers will tell us how to raise the money. That is why we are recruiting them. We will probably know by January,” Sindiso Ngwenya, secretary general of Comesa, said after a news briefing.

Infrastructure development is a capital-intensive business that most African governments struggling with large budget deficits cannot afford, making other regions more attractive to investors.

Members of major trading blocs in Africa plan to pitch multi-billion dollar infrastructure projects to development partners at a two-day regional conference in Nairobi to shore up financing support, a senior trade official said on Tuesday.

Ngwenya attributed the high cost of trade in the region to logistics costs, with poor infrastructure accounting for as much as 60% of such spending.

“Our expectation is that out of the $5.2-billion projects that are ready for financing, they [development partners] will finance them,” Ngwenya told Reuters.

Ngwenya added that there were more projects that still needed preparation before the trade bloc seeks funding.

Most of the estimated 30 countries in the trading blocs are landlocked, forcing them to rely on countries with ports like Kenya, Tanzania and Mozambique, incurring some of the highest costs in the world due to congested ports and poor road and railway networks.

The World Bank 2011 Doing Business report said many landlocked economies face high inland transport costs to reach ports incurring higher export and import costs than other regions.

Investors from the United States, Germany, China, among others will meet government officials and members of the trading blocs in Nairobi on Wednesday, Ngwenya said. — Reuters